# India HR & Payroll Statutory Compliance Hub (2026 Dataset)

Comprehensive statutory reference guide for Indian payroll: multi-state Professional Tax (PT) slabs, Labour Welfare Fund (LWF) contribution rules, EPFO & ESIC statutory ceilings, Income Tax TDS under Section 115BAC, and Payment of Gratuity Act 1972 formulas.

## Key facts

- **EPFO contribution rate:** 12% employee + 12% employer (EPS ₹15k cap)
- **ESIC wage threshold:** ₹21,000 gross monthly wage (4% total)
- **Constitutional PT ceiling:** ₹2,500/year (Article 276(2))
- **Gratuity formula:** (15 * Last Drawn Basic * Service Years) / 26
- **Default tax regime:** Section 115BAC New Tax Regime
- **Last verified:** 2026-08-29

## What changed in 2026

- EPFO contributions are calculated on basic + DA with mandatory coverage for establishments with 20+ employees.
- ESIC applies to establishments with 10+ employees with wage ceiling of ₹21,000 per month.
- State-level Professional Tax requires distinct monthly/annual filing schedules across 28 states (capped at ₹2,500/yr).
- Section 115BAC is the default tax regime in FY 2026-27 with standard deduction and rebate under Section 87A.
- Gratuity requires 5 years continuous service calculated at 15 days basic salary per year of completed service.

## How the UAE and Saudi compliance systems interlock

**India chain: PAN/Aadhaar → EPFO (UAN) → ESIC (IP) → Income Tax TDS (TRACES) → State PT (Commercial Taxes).**

Indian statutory payroll interlocks across central and state authorities. An employee's PAN and Aadhaar anchor their Universal Account Number (UAN) for provident fund and Insurance Person (IP) number for ESIC. Monthly TDS deductor files must match PAN records on TRACES for Form 16 generation, while state-level PTRC and LWF returns must reconcile with employee gross wages.

## UAE compliance obligations

| Statutory Component | Governing Act | Contribution / Rate | What NeuralHR.AI Automates |
| --- | --- | --- | --- |
| Employees' Provident Fund (EPFO) | EPF & MP Act 1952 | 12% + 12% (EPS ₹15k cap) | Automates ECR generation, UAN linking, and electronic filing |
| Employees' State Insurance (ESIC) | ESI Act 1948 | 0.75% employee + 3.25% employer | Calculates contributions and prepares monthly ESIC challan |
| Professional Tax (PT) | State PT Acts (Art 276) | State-specific (max ₹2,500/yr) | Applies 28-state PT slabs and prepares PTRC/PTEC returns |
| Income Tax TDS (Form 16) | Income Tax Act 1961 (Sec 115BAC) | Old vs New Regime TDS | Computes monthly TDS, collects investment declarations, and outputs Form 16 Part A/B |
| Payment of Gratuity | Payment of Gratuity Act 1972 | 15/26 formula per completed year | Calculates gratuity liability and generates settlement slips |
| Labour Welfare Fund (LWF) | State LWF Acts | State-specific (June/Dec) | Calculates employee/employer LWF and generates state filings |
| POSH Act Compliance | POSH Act 2013 | Mandatory ICC for 10+ staff | Tracks ICC committee members, complaints log, and annual return filing |

## Saudi Arabia compliance obligations

| State / Hub | Professional Tax (PT) Slabs | Labour Welfare Fund (LWF) | Minimum Wage Framework |
| --- | --- | --- | --- |
| Karnataka (Bangalore) | ₹200/mo (gross ≥ ₹15k, max ₹2,400/yr) | ₹20 emp + ₹40 employer (Annual Dec) | Semi-skilled/Skilled VDA revised semi-annually |
| Maharashtra (Mumbai/Pune) | ₹200/mo (11 mo) + ₹300 (Feb) (max ₹2,500/yr) | ₹12 emp + ₹36 employer (June & Dec) | Basic + Special Allowance (Zone I/II/III) |
| Telangana & AP (Hyderabad) | ₹150–₹200/mo (max ₹2,400/yr) | ₹20 emp + ₹50 employer (Annual Dec) | CPI-linked variable dearness allowance |
| Tamil Nadu (Chennai) | Up to ₹1,250 per half-year (max ₹2,500/yr) | ₹20 emp + ₹40 employer (Annual Dec) | Zones A & B wage rates revised annually |
| Delhi-NCR | Nil (No Professional Tax in Delhi) | ₹0.75 emp + ₹2.25 employer (June & Dec) | Notified minimum wages revised bi-annually |
| Gujarat (GIFT City/Ahmedabad) | Up to ₹200/mo (gross > ₹12k, max ₹2,400/yr) | ₹3 emp + ₹6 employer (June & Dec) | Minimum wages with Cost of Living Index allowance |
| West Bengal (Kolkata) | ₹110–₹200/mo (max ₹2,500/yr) | ₹3 emp + ₹9 employer (June & Dec) | Zones A & B agriculture/non-agriculture slabs |

Multi-state Indian employers must ensure that Professional Tax registrations (PTEC/PTRC) are maintained in every state where employees reside, and that Section 115BAC tax regime elections are recorded at the start of the financial year.

## Frequently asked questions

### What is the EPFO contribution calculation for 2026?

Employee contributes 12% of basic + DA. Employer contributes 12%, split as 8.33% to EPS (capped at ₹15,000 basic = ₹1,250/mo) and 3.67% to EPF, plus 0.50% EDLI and 0.50% EPF admin charges.

### What is the default tax regime in India for FY 2026-27?

The New Tax Regime under Section 115BAC is the default regime. Employees must actively opt into the Old Tax Regime to claim deductions like Section 80C, 80D, and HRA.

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Canonical page: https://neuralhr.ai/en/india-hr-compliance-hub
Last verified: 2026-08-29

Published by NeuralHR.AI — AI-native HR and payroll platform for the UAE, Saudi Arabia and India.